Middle Eastern promise

Elaine Maslin

January 1, 2015

The shallow waters of the Persian Gulf, also known as the Arabian Gulf, belie the plethora of offshore infrastructure – new and old – in the Middle East. Elaine Maslin probes beneath the waves.

In 2005, Maersk Oil Qatar approved a field development plan for a major expansion of the Al Shaheen field infrastructure, with 15 new process and wellhead platforms. Photo from Maersk Oil.
 

Despite its immense resources, the Middle East has often been missed off the maps of offshore oil and gas firms. Yet, this region has one of the highest clusters of offshore platforms globally.

While they’re mostly in less than 70m deep water, those operating them face many of the same challenges experienced in other parts of the world – their assets, both the platforms and pipelines, and reservoirs, are aging, which requires enhanced oil recovery expertise, as well as inspection repair and maintenance and asset integrity specialists.

The amount of infrastructure in the Persian Gulf is also increasing. According to data from Infield Systems, some 126 new platforms were either installed or are due to be installed in 2010- 2015 offshore the United Arab Emirates (UAE), Iran, Qatar, and Saudi Arabia.

The plethora of facilities are there for a big reason. Just over half of the world’s proven conventional oil reserves and 42% of the world’s proven conventional gas reserves are in the Middle East and North Africa (MENA). The region has 13 of the world’s 20 giant oilfields as well as the largest gas field in the world – South Pars, shared between Iran and Qatar.

Many were discovered in the 1960s, shortly after offshore exploration started, such as Upper Zakum (1964, United Arab Emirates) and Zuluf (1965, Saudi Arabia) and they continue to produce on a prolific scale, prompting continued expansion, such as at the Al Shaheen field, discovered offshore Qatar in 1974 and South Pars (known as the North Field offshore Qatar).

The fields are big, and so is the extent of the facilities that produce them. According to a Scottish Enterprise report, there were some 750 offshore fixed platforms in the Middle East at the end of 2012.

But, many of them are aging. Some 450 of the 750 are off the United Arab Emirates and more than 70% of these are 25+ years old, with some beyond 40 years, says Anupam Ghosal, DNV GL services line area manager for verification in the Middle East and India.

The United Arab Emirates and key infrastructure. Image from the US Energy Information Administration.
 

This alone means there is a significant amount of work to do. Abu Dhabi Marine Operating Co. (ADMA-OPCO) has launched various life extension projects and plans to upgrade and replace all its aging pipeline networks by 2030, for example, DNV GL says.

Aging assets attracted FoundOcean to the region. The company opened an office in Dubai in early 2014, offering strengthening, modification and repair work, using grouting and fabric formworks out of Sharjah, and will be looking to expand into Saudi Arabia and Qatar.

Naval Sondhi, associate director, FoundOcean, says: “The Middle East has lots of structures getting close or well beyond their original design life, so there is a lot of demand for ensuring structural integrity and for the pipelines that start to suffer from free span movement.”

Martin Grant, CEO of Energy at UK-based engineering and project management firm Atkins says: “We are finding there is a focus on asset management strengthening. ADNOC more and more are using us to do finite element analysis on aging assets. Assets are getting older, most were designed for a 20-25-year life and most are now required to operate beyond that. Oil is more valuable than it has been and although it is near to $80/bbl, this historically is still a high number. Underpinning all of that, without a doubt the industry worries more about facilities than ever before, particularly as they are pushing the envelope. The challenge in the Middle East is that there is a huge number of structures. Because the water depth is shallow very often fields are exploited using multiple small platforms, so there is a lot of steel in the water.”

Another challenge for the region is the scale of the reservoirs and in managing hydrocarbon processing through the life of the fields, including dealing with larger amounts of produced water and sour production.

As well as maintaining assets, a large focus is on pushing up recovery rates at these existing giant fields. Total, which is the only international oil company to operate a field in Abu Dhabi, in partnership with Japan’s Inpex, has been “pushing recovery to the limits” at the Abu Al Bukhoosh field using advanced seismic and enhanced oil recovery (EOR) technologies.

The Abu Al Bukhoosh central facility, operated by Total, offshore Abu Dhabi. Photo from Total.
 

UAE production amounted to 10% of Total’s total production in 2012. Abu Al Bukhoosh, which extends over 20sq km, was discovered in 1969 and production started in 1974. In total, the field now has 116 wells, 23 platforms, 29 subsea lines, and seven subsea wells and recovery rates have reached 55%, through advanced seismic and enhanced oil recovery techniques, including gas lift, from 1981, and gas injection, from 1991, to aid reservoir understanding.

Technologies such as electrical submersible pumps (ESP) are key for some offshore fields, such as Abu Dhabi Oil Co.’s Mubarraz concession. The first was installed on the concession in 1975. By September 2014, 45 producers on the concession contain ESPs.

Operators, including international firms such as BP and Statoil, have been discussing how CO2 could be used for EOR in the Middle East, to reduce natural gas use for injection but also deal with CO2. During the Abu Dhabi International Petroleum Exhibition & Conference (ADIPEC), Masdar and ADNOC announced Al Reyadah, the Middle East’s first company focused on exploring and developing commercial scale projects for carbon capture, use and sequestration. Japan’s JOGMEC is also carrying out research and development with ADNOC on CO2 for EOR.

Operators are also spending cash extending and redeveloping fields. In 2005, Maersk Oil agreed a plan to expand the Al Shaheen field, offshore Qatar, with a further 15 new platforms and 160 production and water injection wells. By 2012, Al Shaheen totaled 35 platforms and produced around 40% of Qatar’s oil and gas output.

Last year, Qatar Petroleum announced it was going to invest some US$11 billion redeveloping the offshore Bul Hanine oilfield, which has been onstream since 1972, by drilling 150 wells by 2028 to double production.

Zadco, a partnership between ADNOC, ExxonMobil, and JADCO, is currently expanding the Zakum field, with for four new artificial islands and additional satellite platforms. The offshore facilities are due to complete in 2015, with the islands completing next. Upper Zakum sits 84km northwest of Abu Dhabi. It already comprises some 90 platforms, including an accommodation platform able to house 550 people. Zadco says Zakum, is the second largest oil field in the Arabian Gulf, containing some 50 billion bo.

Scottish Enterprise’s report says, overall in the Middle East, in 2012-17, some 92 new installations are expected to be installed offshore the UAE, 56 offshore Iran and 48 offshore Saudi Arabia, taking the total in the MENA region from 1807 at the end of 2012 to nearly 1994 by the end of 2017.

Fixed structures (including piled platforms, gravel islands, caisson platforms, jackups and gravity-based structures) will likely account for most of the new facilities, having represented some 96% of offshore platform spend over the 2008-2012 period.

Zadco’s Zakum supercomplex, offshore Abu Dhabi. Photo from Tony Cavill.
 

But, the focus is not just on existing fields. ADNOC has said it is planning to increase production capacity to 3.5MM b/d by 2018. ADMA-OPCO, ADNOC’s offshore arm, is expected to contribute about half of this, from existing fields, but also from new fields, including Umm Lulu and Nasr. ADMA-OPCO recently agreed three contract packages for Nasr, with NPCC, Hyundai Heavy Industries and Technip. The project will include seven new wellhead towers, and 110km infield pipelines.

Umm Lulu project, due to be complete in 2018, will comprise six well head towers and six other new platforms, as well as infield pipelines and cables. National Petroleum Construction Co. has the EPC contract for the project, part in partnership with Technip.

Qatar is working on the North Field Barzan Project, which includes on and offshore facilities. Qatar Petroleum is also assessing its 2013 Khuff discovery, the first new gas discovery offshore Qatar in more than 40 years in exploration Block 4 North. Further exploration is ongoing.

Meanwhile other countries are looking to build offshore positions. Oman, which has little offshore production to date, has said it is looking to increase exploration off its waters. Kuwait, which has no offshore production, recently completed 2D and 3D seismic in its offshore area.

Deepwater activity is starting to take hold, with Saudi Aramco in the early stages of deepwater exploration in the Saudi Arabian Red Sea.

Steve Molloy, Aquaterra Energy’s Middle East and North Africa region manager, sees a potential for the UK-based engineering company’s minimum facilities and conductor supported platform designs in the region – including Iran, when sanctions ease to the degree that western firms are able to once again operate in the country.

“Even with the existing facilities, there are opportunities for minimum facilities platforms, providing a low cost solution,” Molloy says, and a potential alternative to the artificial islands built in some areas. “There are a number of conductor supported platforms already installed, offshore Qatar and UAE. Saudi Arabia is the next step. It is also quite exciting to see the opportunities that might come out of Iran.”

Driving some of the offshore development is the strong growth in natural gas demand. While the Arabian Gulf has an abundance of natural gas reserves – Iran has the second largest gas reserves in the world – only Qatar is a significant exporter.

Saudi Aramco’s Karan offshore gas project – the company’s first offshore gas find – reached planned capacity in 2012, after coming onstream earlier in the year, and production start-up was expected from the Arabiyah and Hasbah offshore gas fields, which are part of the Al Wasit Gas Program, and comprise 15 offshore platforms, in 2014. Together, the Al Wasit fields and Karan are expected to increase Saudi Aramco’s output by 40% – most of the gas will be for local power and industrial feedstock.

The growth, in brownfield and greenfield, will make the Middle East one of the key markets for oilfield services companies for decades to come, says Nick Dalgarno, co-head of eastern hemisphere corporate finance at Simmons & Co. International.

Dalgarno says there is an increasing willingness amongst governments and the national oil companies to build relationships with foreign firms to bring know-how and technology into the region, due to an increasing need for enhanced oil recovery, as well as sour gas, heavy oil, tight gas, LNG, GTL, “clean fuels” refineries, carbon capture and storage, nuclear and solar technologies.

“No oilfield services company can afford to ignore the market in the Middle East due to its sheer scale and variety,” he says. “The region is increasingly receptive to bringing in skills and technology from outside to support its exploration and production activity and EOR requirements and indigenous businesses are also seeking opportunities to grow internationally.”